Goldman Sachs (GS+0.1%) President and COO Gary Cohn has been tapped by the president-elect to head his National Economic Council, reports CNBC.

Lloyd Blankfein's right-hand man for years, Cohn was once thought to be his successor in the CEO spot. Blankfein, however, has given no indication he's leaving anytime soon, and Cohn's possible exit has been rumored for a while.

After a three standard deviation move in large-cap bank stocks, it seems logical to think about heading to the sidelines, says analyst Betsy Graseck. But should the names pull back, she recommends adding to positions as the bull case still outweighs the bear case next year.

Using base case 2018 estimates and a target P/E of 12x implies 14% upside for Morgan's eight Overweight-rated stocks. The bull case on 2018 estimates with the same target P/E means upside of 41%.

The FRBNY's William Dudley isn't concerned about the post-election jump in rates at the long end of the curve, and says the Fed is about to start following suit at the short end.

Even the dovish Charles Evans from the Chicago Fed admits inflation is getting closer to the central bank's target, and the labor market is close to full employment.

The 10-year Treasury yield had moved as high as 2.45%, but has pulled back to 2.40%, still up 1.5 basis points on the session.

On the regulatory front, Fed Governor Daniel Tarullo on Friday set himself up as the chief defender of the current bank regulatory regime, but whether his voice will be heard is a different story given the incoming administration, which looks to be staffed with those favoring a far lighter regulatory hand.

There are multi-year highs again across the sector as interest rates continue to rise, but, maybe more importantly, bank investors begin to envision a far less heavy regulatory burden.

In a speech Friday described by FBR's Ed Mills as "going out swinging," Fed Governor Daniel Tarullo set himself up as the chief defender of the status quo, saying he doesn't see a "sound economic case" for rolling back the post-crisis regulatory regime.

Whether anyone hears him much going forward is a different story, given names like former BB&T boss John Allison or former FDIC chief Thomas Hoenig being thrown around as possible Fed vice chairmen for bank supervision. Both Allison and Hoenig are fans of following simple leverage ratios, but Tarullo says just focusing on those is "inadequate and dangerous."

Tarullo's voice will also have to rise above that of Trump's Strategic and Policy Forum led by Blackstone's Stephen Schwarzman.

There's been talk in the Goldman (NYSE:GS) hallways for months that President and COO Gary Cohn - 2nd-in-command to Lloyd Blankfein for a decade - was considering leaving the bank.

His meeting yesterday with the president-elect has amped up that talk (Cohn is reportedly being considered to head OMB).

Should Cohn exit, it would be the end of Goldman's most obvious succession plan, and probably signal that Blankfein isn't going anywhere anytime soon. Another possible successor, Michael Sherwood last week announced his retirement, noting "Lloyd" of late has been talking about "five more years."

It would, however, elevate what surely is a waiting bench, and ease what some frustrated young execs call a "talent bottleneck."

More confidence that rates are rising for real this time, "wide-sweeping" regulatory changes to come, and a better FICC environment have analyst Brian Kleinhanzi upgrading Bank of America (BAC) and Goldman Sachs (GS+0.9%) to Outperform from Market Perform.

Kleinhanzi keeps JPMorgan (JPM+0.8%) and Bank of New York (BK+0.2%) at Outperform.

Turning to regional banks, KBW boosts its estimates for 2017 and 2018 for the large players, and upgrades Citizens Financial (CFG+1.9%) and Comerica (CMA+1.6%) to Outperform, while downgrading KeyCorp (KEY+0.3%) and PNC (PNC-0.2%) to Market Perform. The switch comes as KBW turns its focus on those lenders best positioned for a rising rate environment, and from regulatory relief, not to mention other levers should rates not rise.

Goldman Sachs (GS+0.6%) has conducted an internal review of transactions made by employee Thomas Malafronte, who generated a reported $250M in profit trading junk bonds this year, according to Bloomberg. The probe concluded Malafronte did not violate the so-called Volcker Rule.

The Volcker Rule was aimed at turning bank trading desks into no more than facilitators between buyers and sellers, but the line between that business and speculation can often be a difficult one to discern.

In addition to the big profit at Goldman's credit-trading group, a team of Citigroup traders on its U.S. dollar interest-rate swaps desk pulled down about $300M this year.

Often mentioned as a possible successor to Lloyd Blankfein atop Goldman Sachs (GS-0.1%), Michael Sherwood - the bank's co-head of Europe - is exiting after a three-decade career.

Sherwood has been tied up in an internal spat after he was called to testify in U.K. parliament over the bank's role in the ill-fated sale of BHS (shortly before it collapsed), reports the FT.

For his part, Sherwood says the BHS controversy has nothing to do with his decision, and says "Lloyd" has been busily trying to get him to stay.

“There are so many great people here and they are already picking over my job ... I stopped working for money a long time ago."

Sherwood says his proudest achievement is the “Europeanisation" of his bank, and notes Europe was a tiny loss-generating division when he joined, and now accounts for 30% of global revenue, with profit margins matching those in the U.S.

In a note titled "Universal Banks: A New World Order," Macquarie's David Konrad recommends clients shift exposure to those banks with the most leverage to capital markets, and away from those who could get hurt by slower trade and higher currency volatility, particularly in emerging markets.

Thus his upgrade of Goldman Sachs (GS+0.4%) to Buy, and downgrade of Citigroup (C) to Neutral.

According to TipRanks, Konrad's record puts him in the top 10% of all Wall Street analysts covering any industry.

There aren't any details yet available, but the upgrade is worth noting on its own as it comes following a huge rally in bank stocks, and amid a wave of sell-side downgrades this week (as price target levels are breached).

For now, the 10-year Treasury yield is holding onto the huge gain in posted yesterday, up two basis points today to 2.086%. TLT-0.4%, TBT+0.8%. Fed Funds futures have priced in about a 100% chance of a December rate hike.

The yield curve has shifted both higher and steeper - pure manna for the companies that borrow short and lend long. There's also a new sheriff coming to town, and bank investors are no doubt mulling an eased regulatory regime. KBE+2.45%, KBE+2.4%

Goldman Sachs (NYSE:GS) is considering shifting some of its assets and operations from London to Frankfurt, according to Reuters, as it tries to secure access to the EU market when Britain leaves the bloc.

Coming under the ECB's jurisdiction should allow it to continue selling its services to clients across the eurozone and wider EU post-Brexit.